A group of Philippine nickel ore producers, which does not include Nickel Asia, have agreed to slash output and shipments this year by as much as 20 percent in response to a slide in prices to the lowest in over a decade on weak Chinese demand.
The benchmark nickel on the London Metal Exchange was trading at $8,950 per tonne on Tuesday. It had tumbled to $7,550 on Feb. 11, its lowest since 2003, due to weak Chinese demand and a weak global outlook for stainless steel consumption.
Latest data showed China’s imports of nickel ores and concentrate from Philippines totalled 1.5 million tonnes in the first two months of the year, accounting for 90 percent of the total and down 24 percent from a year earlier.
Nickel Asia will raise its sales this year to China by 6 percent to about 9 million tons of ore, mainly of low- and medium- grade materials containing a maximum 1.5 percent nickel per ton. The Makati-based company accounts for about 20 percent of the Philippines’ nickel-ore exports to China
UNPRECEDENTED levels of Chinese demand for nickel ore has created a sizeable market opening for the Philippines to expand nickel exports, prompting the country to re-examine the underdeveloped minerals industry and maximize output amid a dearth of supply in the region.
An unexpected ore export ban introduced by one of the largest producers, Indonesia, in January has allowed the Philippines to become a top supplier of nickel ore to China, which uses it to make nickel pig iron, a key ingredient in stainless steel. The ban comes at a time when the government is investigating ways to boost the economic contribution of the mining sector, which accounts for less than 1% of GDP, in spite of vast, largely untapped mineral resources.
The Philippines has vast mineral reserves -- estimated at $850 billion, including the third-largest gold reserves in the world, fourth-largest copper reserves and fifth-largest nickel reserves, according to the Philippines Department of Environment and Natural Resources the sector’s economic input is low. Contributions to total exports have stood at single digits until recently, according to the MGB with the export of minerals and mineral products averaging 3.94% from 2003-2012.